TNAG-0042-FCO40-78-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 83

17.

In certain circumstances H.N.G, might wish to make

economic concessions to China: the main possibilities

are:-

(1) an increase in quotas for imports of

manufactured goods from China (which could be

supplied by use of Hong Kong's capacity) and

(2) releases of sterling to Chinese control from

Hong Kong's blocked balances.

18. The effects on the U.I. economy of such concessions

would depend on the quid pro quo. Broadly, however, in

so far as the quid pro quo were economic (e.g. increased

opportunities of a U.K. trade with China, or Chinese

compensation payments for U.K. property seized in

Hong Kong) the effects, depending on the precise terms

of any deal, could range from beneficial to the U.X.

economy to marginally damaging.

19. Really significant economic losses might be

incurred only in so far as H.M.G. felt constrained to

make economic concessions for strictly political purposes.

Perhaps the most obvious possibility is the release of

blocked sterling us "ransom" money for U.K. citizens

"captured" in Hong Kong by the Chinese. (Even under

this possibility however how far the U.K. would suffer

economic damage as compared to 1966 1.e. when the

balances were held unblocked to Hong Kong account would

depend on what China did with the sterling acquired.)

Conclusions

20. The broad conclusion is that even taking account of

"natural reduction in Chinese imports from the U.K.

and in Chinese sterling balances (because of a net loss

of foreign exchange receipts arising from taking over

Long Tong paragraph 19) the effects on the U.E. economy

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9

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